The Pursuit of Healthy China 2020

China’s leaders have been keen to learn from the best globally in creating its model for a new health system, which is designed to provide universal healthcare access and treatment for all by 2020. Mark Britnell, KPMG Chairman gives his thoughts on the proposed healthcare reforms and the incredible business opportunities they present for investors

Asia Outlook (AsO): In a nutshell, what are the China healthcare reforms designed to achieve between now and 2020?

Mark Britnell (MB): China has set out an incredibly ambitious reform programme for the next five years, which will be ratified in the 13th Five-Year Plan this March. By 2020, the Government wants to see the introduction of a primary care system very nearly from scratch to keep patients from going straight to hospitals. It wants to reform and streamline the management of public hospitals across hundreds of cities to improve quality of care. It wants to deepen coverage of the three main health insurance schemes and – ultimately – merge the policies and entitlements of well over one billion people together. It also wants to resolve a toxic atmosphere of mistrust that much of the public holds towards doctors and healthcare providers; attacks on care professionals are not an uncommon event in China. That’s at the same time as continuing huge expansions in the numbers of hospitals, clinics, doctors and nurses to further close the gap with high income countries.

As someone that works with governments and ministries of health all over the world, I’m well used to seeing overly-optimistic national targets and strategies and taking them with a pinch of salt. But in China you have to take the Government’s ambitions for its health system very seriously indeed. Just look at the incredible progress it has made in the past 10 years, which many would never have thought possible: more than one billion people brought into health insurance schemes for the first time, more a million doctors added to the workforce and 12 percent annual growth in health expenditures.

Ultimately, if the past five years of China’s reform were about bringing hundreds of millions of people into coverage, the next five years are about making sure that coverage means something in the everyday lives of ordinary citizens. That second phase is undoubtedly the harder task, but I’ve no doubt that they can achieve it if momentum and support are maintained and, of course, if the economy remains strong.

AsO: What factors have led China to amend its healthcare system?

MB: Several realisations are behind healthcare reform taking its place among the top priorities of China’s people and Government. SARS is the most obvious; it really demonstrated that poor health is every bit as big a threat to a country’s safety and prosperity as national security. The disease had a profound impact on Chinese society and made the Government appreciate that to protect its citizens, it needed a functioning health system every bit as much as it needed a functioning military.

Since 2003, I think the debate has become much broader than infectious diseases though. There’s an increasing appreciation across the world now that decent healthcare is essential to economic growth; and spending on it should be seen as an investment in future growth, not a cost. Work by KPMG found that for every year of life expectancy increases, GDP increases by four percent in the long run. So wealth and health are inextricably linked. Right from the very first universal health system of Bismarck’s Germany, governments have invested in health as a means of ensuring the health of their workforce. As the Chinese population ages and chronic diseases become more prevalent, this only becomes more important.

Finally, the drive to stimulate domestic demand in China has been a strong priority of Government for some time. The slowdown and stock market falls we’ve seen in recent weeks are exactly the type of scenario they have been trying to mitigate. I think one of the powerful rationales behind the introduction of a universal health insurance scheme - albeit with limited depth of coverage - was the observation that Chinese families were saving a very high proportion of their income rather than spending it. So health coverage was partly an attempt to stimulate private spending on other things.

AsO: What would be your advice to anyone seeking to capitalise on the business opportunities that arise from the reforms in China?

MB: Any sector that forecasts 10 to 15 percent annual spending growth - as China’s health system does - is going to see commercial opportunities arise. China will certainly need a lot of help to deliver its ambitions for healthcare by 2020. Medical education will need to expand rapidly, new IT systems are needed and so are innovative ways of using technology to increase access in rural areas. The management challenges of wide-scale hospital reform are almost too great to imagine. I also think the challenge of gathering and using big data on healthcare delivery and the health of the population is an incredible opportunity for ambitious partners to get involved in.

In addition to the challenge of broadening access to all, there are also significant opportunities from China’s burgeoning middle-class, who increasingly expect levels of quality equivalent to the US and Europe, and are willing to pay for it. Many of China’s neighbours are setting themselves up as destinations for medical tourism, but undoubtedly the domestic market for top quality private care in China is going to rise and rise.

AsO: If you had to choose four key factors from healthcare systems across the globe to combine together to make a perfect health system, what would they be and why?

MB: Well, in my recent book I pick twelve facets of different countries that would make a near-perfect system. But if I was selecting four for a country like China then I’d first choose the primary care system of Israel, which spends roughly the same proportion of its economy as China on healthcare, but puts a far greater weight of that spending onto GPs and out-of-hospital care. The same four organisations both pay for and provide care, so there’s a very strong incentive for effective gatekeeping and only using expensive hospital care where there is genuine benefit to the patient.

Second would be the technological innovation of Singapore, which was recently ranked first across all countries for the extent of its eHealth infrastructure. More than 40 percent of the population can now access their full medical record online using a system which was rolled out in 2011 and ambitiously links every level of care provider across the city-state. Doing that nationally across a country of China’s size would be a huge challenge, but even if only at the Province level, this would give health system leaders the understanding and grip of the system to raise standards and improve performance.

Third would be the community services of Brazil. As I mentioned above, China is seeing rapidly rising rates of chronic diseases like diabetes, heart and respiratory diseases. By far the most sustainable way to do that is to invest in care models that keep people well, rather than waiting until a problem is so serious that they go to hospital. Brazil’s system relies on community teams that blend a doctor with a nurse and six community health workers. These teams visit every house in their boundary every month, regardless of whether anyone is sick, aiming to treat problems at their source. For a country that, like China, spends comparably little on healthcare, it’s a very smart way of getting the most out of the resources available.

Finally, and for the same reasons as Brazil, the health promotion of the Scandinavian countries. As they say in public health, it’s much easier to stop people falling in the river than rescuing them as they drown, and these countries have collaborated to make their societies ones that encourage and support good health. That involves environmental protection, anti-smoking legislation, and an effective balance to be struck between the responsibilities of individuals and the state.

I often say that while the recent US health reforms are the most complicated in the world, the biggest and most complex are China’s. China’s leaders have been keen to learn from the best globally in designing a model for their health system, but in reality the country will forge its own path and, I’m sure, create new innovations in the coming years that others in turn will look to with admiration.